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This week, I found Bill Gross’s "PIMCO secular forum" article fascinating. I’ve never been a fan of the word "capitulation," yet the unrelenting global Credit Bubble is today forcing even the more circumspect investment professionals to fancy the glass half full; to presume that glass will hold liquid for the foreseeable future; and to concede that there is little alternative than to participate semi-blindly in the runaway boom.

In this performance-based financial world in which we now operate, one can only sit gingerly on the sideline for so long before the strain of underperformance becomes too much to bear. To be sure, we are witnessing in real time the propensity for unchecked Credit Bubbles to (more than) sustain themselves for significantly longer than discerning analysts ever imagined - and how the resulting interplay of endless liquidity, embedded asset inflation, and speculative market dynamics inherently fosters "blow-off" excess. These dynamics were at play in the U.S. bond market back in 1993, various emerging markets throughout the nineties, tech/telecom in 1999/early-2000, and more recently in U.S. subprime and global M&A. The Fed has apparently learned little.

Curiously, Mr. Gross and others continue to use the terminology "stable disequilibrium" to describe the global backdrop. Such commentary is detached from the reality of ongoing Credit Bubble excess. There is today ample evidence that each year brings with it only greater Credit excess - and with it only more dramatic inflationary effects – most notably today’s gargantuan global financial flows. A semblance of "stability" is maintained only because, first of all, the global Credit infrastructure has thus far succeeded in generally channeling global flows to the securities markets, while creating the requisite ever-increasing quantities of Credit and marketplace liquidity.

The greatest Credit, speculation, and prices effects remain largely contained in global asset markets, with speculators content for now to be crowded tightly together on the long side. Financial crisis it is not, but it does conspicuously fly in the face of claims of "price stability." Indeed, global asset inflation has "gone parabolic". It is worth noting that in just the past two years China’s Shanghai Composite index has surged 265%, India’s Sensex 122%, Russia’s RTS 187%, Mexico’s Bolsa 142%, and Brazil’s Bovespa 108%.

The gentlemen at Pimco (and elsewhere) also cling to the fanciful notion that that the global financial apparatus and economies are buttressed by a "Bretton Woods II" "monetary regime." I’ll cling to the view that this perspective is also not conducive to sound analysis. Please recognize that monetary regimes are disciplining frameworks accepted by participants to ensure the promotion of stable Credit, financial flows, currencies, trade and economic performance. The so-called "Bretton Woods II" – the ad hoc mechanism that evolved in the global central bank community for the purpose of recycling excess dollar liquidity back to U.S. securities markets – is in reality the Anti-Monetary Regime. Its purpose – the only reason for existence – is to accommodate Credit and liquidity excess, destabilizing financial flows, unprecedented trade imbalances, and unparalleled global financial and economic imbalances. And, as we’ve witnessed, to accommodate is to only invite greater excess. Financial scheme, perhaps, but this is no monetary regime.

These days, the numbers all seem to grow exponentially. On the one hand, there is the incredible infrastructure necessary to create sufficient U.S. Credit growth required to sustain the U.S. Credit and Economic Bubbles – to transform/"intermediate" ever-increasing quantities of riskier Credits into sufficiently precious "money"-like debt instruments. Here we see the ongoing issuance explosion of "structured" debt instruments. There is, as well, the ballooning Wall Street balance sheets and derivatives markets, along with the almost $600 y-t-d growth in primary dealer "repo" positions. Hedge fund assets were estimated to have increased by a record $250bn during the first quarter. And, importantly, debt issuance is on record pace. And, on the other hand, there is the massive expansion of foreign reserves necessary to mop up the flood of dollar liquidity inundating the global financial system. Reserves expanded about $980bn over the past year (22%) and have only accelerated of late. The U.S. Bubble is sustained, but at an escalating cost of increasingly unwieldy global flows and asset Bubbles.

Doug Noland is a market strategist at Prudent Bear Funds. Their website is www.prudentbear.com.